So I read this Animal Spirits post on John Williams' prediction of hyperinflation, and it got me thinking: We don't have an anti-inflation policy anymore.
Yeah, we have the Fed. But the Fed's policy these days seems to be to avoid deflation. That's pro-inflation policy.
What else have we got? Nothing. We've got fiscal policy, which is always stimulative because the budget is never in balance. And we've got the tax code, which is always pro-growth or pro-spending (or pro-investment; but investment is spending), and therefore pro-inflation. And we've got the Fed, trying to keep prices from dropping.
No anti-inflation policy.
We need an anti-inflation policy and we have too much debt. Hmm... Too bad there's not some way to kill two birds with one stone here. And you know, there is a way.
To fight inflation we need to take money out of the spending stream. Hmm... We need to get people to spend a little less...
Now that's odd. These days people are spending less. That's what "recession" means: to go backwards.
And people are trying to reduce debt. That's where the money's going. That's why it isn't pushing up prices. That's why the Fed these days is trying to keep prices from dropping...
So people are spending less and trying to reduce debt. Now, that's an anti-inflation policy. If we'd been doing it since the 1970s, we'd have a lot less debt today, and prices would be a lot lower. And we would have avoided this credit crisis and the threat of depression. We would have avoided that.
People want to spend less right now, and reduce their debt. So, maybe Congress should try to get on everybody's good side, and help us reduce our debt. Maybe Congress should set up tax incentives to accelerate the repayment of debt. Pay off a little extra debt, get a little break on your taxes. People would go for that, I think. Congress would do it, to get on our good side. And it would help the economy.